The government could infuse Rs 40,000 crore in public sector banks (PSBs) in the current fiscal year, according to a report by The Economic Times.
The move will help state-run lenders improve their balance sheets and enable them to boost lending.
The announcement is likely to be made when the budget is presented on July 5, the report said.
“This capital will be used to support credit growth and help some weaker banks maintain regulatory norms,” a government official told the paper.
The government could release the amount after the banks announce their results for the first quarter of FY20, the report added.
Moneycontrol could not independently verify the story.
The Reserve Bank of India (RBI) has in the past few months removed six banks from its prompt corrective action (PCA) framework, which restricts lending by PSBs.
Central Bank of India, IDBI Bank, Indian Overseas Bank, UCO Bank and United Bank of India are still under PCA framework.
In FY19, the government injected Rs 1.6 lakh crore into state-run lenders.
“Some of this (the capital) can be can be given as growth capital or in case there is a merger and it is needed to give that merged entity some cushion,” an official told paper.
Bank credit grew 11.7 percent in April, higher than 10.5 percent recorded in the same month last year, the report said citing RBI data.
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